September 11, 2015

WSJ: The Art of the Donald in 10 Easy Steps

On page five of Donald Trump’s 1987 book “Trump: The Art of the Deal,” he says: “Sometimes it pays to be a little wild.” Apparently people believed advice like that could make them rich—the book sold more than a million copies. But as The Donald climbs to dizzying heights in presidential polls, it’s a good time to take a look at the real—and decidedly non-wild—secrets of his success. Behold Trumponomics in 10 easy steps.

1. Be born rich. Mr. Trump’s father, Fred C. Trump, built a real-estate empire after World War II and in 1999 left an estimated $250 million estate. One of hissuccess secrets was taking advantage of Federal Housing Administration financing to build cheap houses in Brooklyn and Queens. The golden government apple didn’t fall far from the tree.

2. Own politicians. In 1974 at age 28, Mr. Trump officially took over the family business, the Trump Organization. His father was a buddy of a guy named Abe Beame, who ended up mayor of New York in the mid-1970s. That proved good for the Trump bottom line.

In the 1980s Donald Trump bankrolled people campaigning for seats on the New York City Board of Estimate. Surprise: The board decided land-use matters. Mr. Trump is one of the top political donors in New York state, according to the New York Public Interest Research Group, and Democratic Gov. Andrew Cuomo, who received $64,000, is one happy recipient. Mr. Trump said in a July interview that “when you give, they do whatever the hell you want them to do. As a businessman, I need that.” As the saying goes, an honest politician is one who, when he is bought, will stay bought.

3. Get tax breaks. Mr. Trump’s first big real-estate win in the 1970s was converting New York’s old Commodore Hotel into a Grand Hyatt. His dad’s friend Mayor Beame kindly extended a 40-year tax abatement worth $60 million in its first decade. In 2011 Mr. Trump told the Los Angeles Times that someone had once asked him how he had finagled a 40-year abatement, and Mr. Trump said he replied: “Because I didn’t ask for 50.”

Trump Tower on Fifth Avenue has enjoyed a $164 million property-tax exemption good through next year. But someone must pay taxes, and oh, that’s right, New York is ranked No. 1 for worst taxes, with an average burden of $9,718—almost 40% more than the national average, according to an analysis by WalletHub.

4. Monetize ad diction. Here’s where it gets tricky. Protected cash flow from apartments and office space is nice, and the Trump name attracts tenants willing to blow cash. But there must be another way to extract money from people. Fortunately, gambling became legal in New Jersey in 1976. Voilà: Harrah’s at Trump Plaza opened in 1984 and quickly shortened its name to Trump Plaza (hey, it was the ’80s, and the name said classy to high rollers). The casino closed last year. Gambling is a tax on people who don’t understand statistics. The Donald must have earned high marks in stats 101 at Wharton.

5. Go in debt up to our eyeballs.Another gem from “The Art of the Deal”: Most people “think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage.” Mr. Trump’s third Atlantic City casino, the 17-acre Trump Taj Mahal, opened in 1990. But Mr. Trump loaded up $3 billion in debt from an expensive takeover, construction and cost overruns. Which brings us to . . .

6. Stick banks and bondholders with disasters.When the Trump Taj Mahal opened, the New York Times quoted gaming publisher Al Glasgow as saying, “Will the Taj work? It can’t miss. It’s like spitting and missing the floor.’’ Well, this is awkward. His company filed for bankruptcy in 1991, tagging enormous losses on banks and bondholders. Mr. Trump, for his part, gave up half the company and his 282-foot yacht. (Not to worry, he still has other boats.)

By 2004 Trump Hotels and Casino Resorts filed for bankruptcy. The company had issued more than $1.8 billion in debt, much of it in junk bonds, whose holders now controlled the company’s fate. In exchange for new debt with a lower interest rate and a personal infusion of $72 million, Mr. Trump’s equity stake shrunk to 27% from 47%.

7. Churn out books. Pop business books are often like tomes fromDeepak Chopra, Eckhart Tolle or other gurus. You read them in a flash, feel inspired for 24 hours and then days later can’t recall a single worthwhile syllable. Mr. Trump mastered this art: “Trump: Think Like a Billionaire” (2004); “Trump 101: The Way to Success” (2006); “Midas Touch” (2011). It’s hard to find anyone who profited from these books, other than the guy with the I’m-a-serious-thinker expression on the cover.

8. Franchise your name.With banks and bondholders feeling a little Trump-toasted, megadeals were shelved for a while in the 1990s. But the best leverage is putting up no money at all. Mr. Trump franchised his name to condo hotels and other real-estate projects in New York, New Jersey, Florida and wherever else someone was willing to pony up the money and pay a licensing fee. So he has added a mortgage company, real-estate brokerage, education firm, bottled water, vodka and, yes, even the “Success by Trump” fragrance.

9. Channel your innerKim Kardashian.With so many Trump properties and golf courses and “The Apprentice” television show, it’s hard for most people to remember how Donald Trump got so rich in the first place. In the Kardashian and Nicky Hilton tradition, Mr. Trump is now famous because he is famous.

10. Run for office. His presidential aspirations seem to be a vanity run gone wild. But as students of the Trumpian Way know: Sometimes it pays to be a little wild. And when it doesn’t? Go to step two and start over.